Forecasting Eye 

One sector that has arguably not received the attention it deserves in the Brexit debate is the maritime sector, which is comprised of ports, shipping, and associated services. Although relatively small, only accounting for 0.6% of UK GDP, the maritime sector makes up 1.1% of UK turnover and 2.3% of exports of goods and services. However, these figures don’t reflect the sector’s biggest contribution to the UK economy: the facilitation of trade. According to the UK Chamber of Shipping, 95% of the UK’s trade passes through its ports.

The maritime sector is among the most exposed to the disruption brought about by the UK’s potential withdrawal from the customs union and single market:

• An end to the free movement of goods would mean customs checks, customs duties, regulatory checks and VAT processing on goods flowing between the UK and the EU, increasing the time and cost for UK exporters.
• Meanwhile, according to UK Chamber of Shipping Seafarer Statistics over 36% of non-UK seafarers surveyed in 2017 originate from Poland, Croatia, Latvia and Romania alone.[1] Given that the current supply of labour from places like Eastern Europe may soon be reduced, higher unskilled labour costs may soon be on the horizon for the maritime sector.
• Another consequence of an end to the free movement of people is that ferry operators could face a fall in demand from UK and EU nationals travelling across the channel, due to increased complexities at the border, such as: longer processing times, a change to non-EU lanes for UK nationals, additional border checks, and the possibility of needing a visa for longer stays.
• The free movement of services is another element of the UK’s current relationship with the EU that could possibly end after April 12. Some unregulated services, such as research and consulting, may remain relatively unaffected by Brexit. However, frictions would emerge in other more regulated areas. This could affect the ability of UK operators to offer services in between EU ports or the provision of financial services within the European Maritime Sector.
• In order to maintain existing operations in the EU, port operators may be induced to register under a different country. An example of this is P&O, a freight operator that announced in January that they would re-flag all their ships under the Cyprus flag. [2]
• Brexit will require high levels of capital investment by UK ports, in order to facilitate the potential customs and regulatory checks. The critical importance of these investments has been hammered home by a study from Imperial College London found that every extra minute spent on vehicle checks at UK ports could lead to an additional 10 miles of traffic queues. [3]

One specific example of a port that could be seriously affected by a no-deal scenario would be the port of Dover. In 2017 the port of Dover alone handled up to 17% of the UK’s entire trade in goods (valued at around £220 billion). [4] Moreover, the Dover-Calais crossing accounts for nearly half of all short sea passenger routes (i.e. from UK ports to European ports). [5]

Much of the discussion surrounding Brexit has been centred on the financial services and automotive sectors. However, through its role as a facilitator of the overwhelming majority of UK trade, the maritime sector should also be a key consideration for the government as it navigates the choppy waters that are the Brexit negotiations. 

[1] Department for Transport – Seafarers in the UK Shipping Industry: 2017

[2] Reuters – P&O to Change Flags of UK Ships

[3] BBC News – Post Brexit Border Checks May Triple Border Queues to Port

[4] https://www.doverport.co.uk/about/news/port-of-dover-announces-fifth-consecutive-record-y/13341/

[5] ONS – UK international short sea passenger movements, by ferry route (SPAS0102)

Contact: Carlos Fatas cfatas@cebr.com – 020 7324 2881